Student Lending revenues declined 27.0% during the fourth quarter to $30.7 million, from $42.0 million in the prior year period. Student Loan Placement Volume (defined below) during the quarter totaled$1.7 billion, which was up $0.2 billion from the prior year period.

Healthcare revenues declined during the fourth quarter of 2014 to $2.4 million from $10.9 million in the prior year period. Our Net Claim Recovery Volume (defined below) during the quarter was $21.2 million, compared to $96.5 million in the prior year period. Other revenues decreased during the fourth quarter to $6.6 million from $7.0 million in the prior year period. In August, our RAC contract was extended, with a limited scope of permitted audit review, after all activity under the contract had been halted as of June 1, 2014. The timing of the restarted activities did not result in the recognition of any significant related revenues before year end and unless the scope of audit activity is expanded, we do not expect the RAC contract to have a material impact on our revenues in 2015.

As of December 31, 2014, the Company had cash and cash equivalents of approximately $80.3 million.

Full Year 2014 Results

Revenues for the full year ended December 31, 2014 were $195.4 million, a decrease of 23.5%, compared to revenues of $255.3 million in the prior year period. Student Lending revenues declined 15.5% to $138.3 million from $163.7 million in 2013. Student Loan Placement Volume totaled $6.7 billion, an increase of 1.1% compared to the prior year. Healthcare revenues declined 51.8% to $32.5 million from $67.5 million in the prior year. Our Net Claim Recovery Volume was $287.8 million, compared to $598.1 million in the prior year. Other revenues grew 2.1% to $24.6 million from $24.1 million in the prior year.

Net income for the full year was $9.4 million, or $0.19 per share on a fully diluted basis, compared to $36.3 million or $0.74 per share on a fully diluted basis, in 2013. Adjusted EBITDA for 2014 was $44.7 million as compared to $89.4 million in 2013. Adjusted net income for 2014 was $15.3 million, resulting in adjusted net income of $0.31 per share on a fully diluted basis. This compares to $42.8 million or $0.87 per fully diluted share in 2013.

Business Outlook

"Our operating landscape has undergone significant changes over the past 12 months, and as a result we believe that 2015 is going to be another transitional year regardless of the timing of the contract awards. We will need to work hard to streamline our operations and maximize productivity during this period. We expect our 2015 full year revenue to be in the range of $150 to $160 million," concluded Im.

Terms used in this Press Release

Student Loan Placement Volume refers to the dollar volume of defaulted student loans first placed with us during the specified period by public and private clients for recovery. Placement Volume allows us to measure and track trends in the amount of inventory our clients in the student lending market are placing with us during any period. The revenue associated with the recovery of a portion of these loans may be recognized in subsequent accounting periods, which assists management in estimating future revenues and in allocating resources necessary to address current Placement Volumes.

Net Claim Recovery Volume refers to the dollar volume of improper Medicare claims that we have recovered for CMS during the applicable period net of any amount that we have reserved to cover appeals by healthcare providers. We are paid recovery fees as a percentage of this recovered claim volume. We calculate this metric by dividing our claim recovery revenue by our Claim Recovery Fee Rate (the weighted-average percentage of our fees compared to amounts recovered by CMS). This metric shows trends in the volume of improper payments within our region and allows management to measure our success in finding these improper payments, over time.

Earnings Conference Call

The Company will hold a conference call to discuss its fourth quarter results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed over the Internet from the Company's Investor Relations website at investors.performantcorp.com. Participants should follow the instructions provided on the website to download and install the necessary audio applications. The conference call is also available by dialing 877-705-6003 (domestic) or 201-493-6725 (international). Participants should ask for the Performant Financial fourth quarter earnings conference call.

A replay of the live conference call will be available beginning approximately one hour after the call. The replay will be available on the Company's website or by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the replay passcode 13600250. The telephonic replay will be available until 11:59 pm (Eastern Time), March 5, 2015.

Interested investors and other parties may also listen to a simultaneous webcast of the live conference call by logging onto the Investor Relations section of the Company's website at investors.performantcorp.com. The on-line replay will be available on the website immediately following the call.

About Performant Financial Corporation

Performant helps government and commercial organizations enhance revenue and contain costs by preventing, identifying and recovering waste, improper payments and defaulted assets. Performant is a leading provider of these services in several industries, including healthcare, student loans and government. Powered by their proprietary analytic platform and proprietary workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the company presents adjusted EBITDA and adjusted net income. These measures are not in accordance with generally accepted accounting principles (GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net income to net income determined in accordance with GAAP are included in the "Reconciliation of Non-GAAP Results" table at the end of this press release. We have included adjusted EBITDA and adjusted net income in this press release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. Accordingly, we believe that adjusted EBITDA and adjusted net income provide useful information to investors and analysts in understanding and evaluating our operating results in
the same manner as our management and board of directors. Our use of adjusted EBITDA and adjusted net income has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our expected revenues for 2015 . These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, that our agreements with CMS and the Department of Education, two of our largest customers, are currently subject to rebidding processes, that transition rules have significantly limited our activity under the existing RAC contract, the high level of revenue concentration among the Company's five largest customers, that many of the Company's customer contracts are subject to periodic
renewal, are not exclusive and do not provide for committed business volumes, that the Company faces significant competition in all of its markets, that the U.S. federal government accounts for a significant portion of the Company's revenues, that future legislative and regulatory changes may have significant effects on the Company's business, failure of the Company's or third parties' operating systems and technology infrastructure could disrupt the operation of the Company's business and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company's financial condition and operating results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections
of the Company's annual report on Form 10-K for the year ended December 31, 2013 and subsequently filed reports on Forms 10-Q and 8-K. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share amounts)

Assets

December 31,
2014

December 31,
2013

Current assets:

Cash and cash equivalents

$ 80,298

$ 81,909

Trade accounts receivable, net of allowance for doubtful accounts of $32 and $32, respectively and estimated allowance for appeals of $0 and $1,160, respectively

15,047

19,649

Deferred income taxes

7,605

6,847

Prepaid expenses and other current assets

12,559

4,400

Income tax receivable

4,394

—

Debt issuance costs, current portion

986

1,055

Total current assets

120,889

113,860

Property, equipment, and leasehold improvements, net

27,647

26,247

Identifiable intangible assets, net

29,093

32,513

Goodwill

82,522

81,572

Debt issuance costs, net of current portion

2,456

2,789

Other assets

222

279

Total assets

$ 262,829

$ 257,260

Liabilities and Stockholders' Equity

Current liabilities:

Current maturities of notes payable

$ 9,820

$ 10,763

Accrued salaries and benefits

5,380

11,826

Accounts payable

1,370

2,383

Other current liabilities

8,452

5,311

Income taxes payable

—

103

Estimated liability for appeals

18,625

15,283

Net payable to client

12,110

—

Total current liabilities

55,757

45,669

Notes payable, net of current portion

101,975

122,541

Deferred income taxes

11,666

12,612

Other liabilities

2,259

2,204

Total liabilities

171,657

183,026

Commitments and contingencies

Stockholders' equity:

Common stock, $0.0001 par value. Authorized, 500,000 shares at December 31, 2014 and 2013, respectively; issued and outstanding 49,350 and 48,316 shares at December 31, 2014 and 2013, respectively

5

5

Additional paid-in capital

57,329

49,791

Retained earnings

33,838

24,438

Total stockholders' equity

91,172

74,234

Total liabilities and stockholders' equity

$ 262,829

$ 257,260

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2014

2013

2014

2013

Revenues

$ 39,695

$ 59,976

$ 195,378

$ 255,302

Operating expenses:

Salaries and benefits

22,440

23,820

93,676

96,762

Other operating expenses

18,129

20,357

74,433

85,671

Total operating expenses

40,569

44,177

168,109

182,433

Income (loss) from operations

(874)

15,799

27,269

72,869

Interest expense

(2,406)

(2,812)

(10,171)

(11,564)

Interest income

1

1

1

1

Income (loss) before provision for income taxes

(3,279)

12,988

17,099

61,306

Provision for income taxes

(900)

5,119

7,699

24,967

Net income (loss)

$ (2,379)

$ 7,869

$ 9,400

$ 36,339

Net income (loss) per share

Basic

$ (0.05)

$ 0.16

$ 0.19

$ 0.77

Diluted

$ (0.05)

$ 0.16

$ 0.19

$ 0.74

Weighted average shares

Basic

49,336

48,219

48,816

47,492

Diluted

49,336

49,606

49,834

49,386

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

Twelve Months Ended

December 31,

2014

2013

Cash flows from operating activities:

Net income

$ 9,400

$ 36,339

Adjustments to reconcile net income to net cash provided by operating activities:

(1) Represents direct and incremental costs associated with the Company's secondary offerings in February and April 2013, and expenses incurred in 2014 for potential acquisition and related financing.

(2) Represents amortization of capitalized expenses related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004, and also an acquisition in the first quarter of 2012 to enhance our analytics capabilities.